What Should You Do With Your Stimulus Check?

Certified Mortgage Advisor
NMLS 1701021
April 3, 2020

What is the best way to spend your stimulus check?

Let's make this short and sweet. You're about to get a stimulus check from the government. It might be $1,200. It might be a little less, it might be up to $3,400. It all depends on your family size, but what should you do with this money? It's not often that we just get a check from the government and by not often, I mean, for most people, never. Unless they're getting a tax refund. So how are you going to handle this money?

Not a loan

First, just a couple of minutes to clear up really quickly. This is not a loan against future against the future tax refund. I keep hearing this. That's not true. This is a credit in addition to any tax refunds. So you don't have to pay this back.

Not taxable

Also, this is not taxable. So if you qualify to receive $1,200, you're going to get $1,200 and that's yours, tax-free income, that's an addition to any refund that you might get as well.


Also, I'm not going to talk through income limits and the credits that you get for kids, because there's a calculator, and here's the link: calculator. It takes like two seconds and you'll have a better idea there instead of me trying to give you all the guidelines.

Use it for emergency

So first, what should you spend it on? The first thing you should spend it on is emergency spending. So if you're in the position where your income has dropped, or if you're unemployed, then you absolutely need to use that for emergency spending on things like groceries, rent, mortgage, payments, any necessities that you have.

Unemployed, file right away

If you are unemployed, you need to start the process of filing for unemployment as soon as possible. So you can make sure that advantage of this program and this cares act. So you're gonna spend that on emergency spending.

Build up your emergency fund

If you're in the position where you're not in an emergency where your income hasn't declined or you have enough income in your family to support your basic needs. Then what I want you to do is start working on building up your emergency fund. This needs to be between three to six months. If you can't, you know, let's say you don't have any savings right now and you get $1,200 and that's all you have in savings. Put that in a savings account and don't touch it. Let this be an emergency fund.

This situation is exactly why people preach having a three to six-month emergency fund it's because we never know when something like this is going to happen. So when you get that money, let's keep it as an emergency fund. Don't buy a TV, don't go do other things with his money. Please use it as an emergency fund.

Pay off high-interest debt

If you already have this emergency fund built up, then what you can do is start working on paying off debt. So let's focus on high interest that right now, okay. The most expensive kind of debt let's pay off credit cards, let's pay off personal loans. Let's pay off student loans. If we have them, let's take those balances and start cutting them down.

Down payment on a house

So if you've done that, then you can. At you know, if these things are already taken care of, then you can look at spending that money as a down payment on a house. Now, one word of caution is if you are looking at buying a home, make sure that your income is very stable.

So if you're in a field where you feel like there's a potential that your income is going to decrease, or it already has a decrease, don't go try to buy a home. It's not worth taking on the extra risk and expense of purchasing a home depleting some of your assets right now. All the uncertainty with this pandemic.

So but you can't use it as a down payment. If you have all these things ready to go and your plan is, Hey, I'm ready to buy a house. I have all my finances in order, all I'm emergency funds and my debts paid off. Then you can look at using that as a down payment.

Give it to someone in need

If none of these apply to you, try giving it to somebody in need. Because for a lot of people, $1,200 is not going to go far there are thousands, if not millions of people who are unemployed, who don't have savings, and are going to run into some significant financial hardship. So you could look at giving away that money or a portion of that money to people in need or in the form of food and other basic necessities.

Don't blow it

Ultimately, this is the key. Whether you follow this in order or not, don't go blow that money on something. It's always super exciting when we see money come in and we think, oh, I can finally purchase that thing that I want to buy. But please, use it as wisely as you can. There are so many ways that you can use this to help benefit you in the future.

Save for the future

So if something like this happens again or forbid that this continues to go on for months, You want to make sure that we don't blow that money on something that you absolutely don't need do something right now, benefit yourself, help yourself in the future. This is going to be, you know, a moment where you get to decide how things move. You get to set up the momentum and trajectory for the next few months for you and your family.

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Only for educational usage. All calculations should be verified independently. Win The House You Love LLC is not a lender, does not issue loan qualifications, and does not extend credit of any kind. This is not an offer to lend and should not be used to make decisions on home offers, purchasing decisions, nor loan selections. Not guaranteed to provide accurate results, imply lending terms, qualification amounts, nor real estate advice. Seek counsel from a licensed real estate agent, loan originator, financial planner, accountant, and/or attorney for real estate and/or financial advice. Read the full disclaimer here.